The cryptocurrency market crash has wiped off over $1 trillion: Recently, there has only been one consistency in the Bitcoin price drop after declining after the decrease. And the superlatives have been piling up fast. Riskier assets throughout the world have slumped as the Federal Reserve prepares to remove stimulus from the market. The most valuable digital asset, Bitcoin, fell as high as 8.7% on Friday, falling below $38,000 for the first time in six months. It has lost 40% of its value since its peak in November. Like Ether and meme coins, other digital currencies have experienced just as big, if not greater, losses.
Since its November high, the decrease in bitcoin’s price has wiped off more than $570 billion in market value, and the total crypto market has lost nearly $1.17 trillion. According to Bespoke Investment Group, this is the second-largest ever fall in dollar terms for Bitcoin and the aggregate market, despite considerably higher percentage declines.
In a note, Bespoke analysts noted, “It gives a notion of the scale of value loss that percentage falls can disguise.” “Crypto is, of course, subject to these kind of selloffs because to its historically higher volatility, but considering how enormous market caps have gotten, volatility is worth thinking about both in raw dollar terms and in percentage terms.”
With the Fed’s plans shaking both cryptocurrency and stocks, a recurring narrative in the digital-asset world has emerged: cryptos have twisted and turned almost identically to equities.
“Crypto is reacting to the same kinds of trends that are weighing on risk assets around the world,” said Stephane Ouellette, CEO, and co-founder of FRNT Financial, an institutional crypto-platform. “Unfortunately for some of the more established projects, like as BTC, there is so much cross-correlation within the crypto asset class that it’s practically a certainty that it will collapse, at least temporarily, in a broader altcoin price contraction.”
According to Bloomberg statistics, crypto-related stocks also fell on Friday, with Coinbase Global Inc. plunging over 16 percent at one point and plummeting to its lowest level since going public in the spring of 2021.
Bitcoin’s link to the tech-heavy Nasdaq 100, which is currently approaching its best in a decade, according to Antoni Trenchev, Nexo co-founder and managing partner.
“A tsunami of risk-off sentiment is battering Bitcoin. Keep a watch on traditional markets for more clues,” he advised. “There is a real sense of fear and discomfort among investors.”
Consider the link between Bitcoin and Cathie Wood’s ARK Innovation ETF (ticker ARKK), the poster child for speculative risk-taking. According to Katie Stockton, founder, and managing partner of Fairlead Strategies, a research organization focused on technical analysis, the correlation is over 60% year-to-date, compared to about 14% for the price of gold. She explained that it’s “reminding us to classify Bitcoin and altcoins as risk investments rather than safe havens.”
According to data from Coinglass, a cryptocurrency futures trading and information platform, almost 239,000 traders had their positions canceled in the last 24 hours, with liquidations reaching $874 million.
According to Noelle Acheson, head of market insights at Genesis Global Trading, while liquidations have increased, the numbers are relatively low compared to past falls. Bitcoin’s one-week skew, which compares the cost of bearish options to bullish options, rose to nearly 15% on Wednesday, compared to an average of approximately 6% in the previous seven days.
“This signalled a shift in bearish sentiment, which is consistent with broader market worries given the current macro uncertainty,” she explained.
According to Kara Murphy, chief investment officer at Kestra Investment Management, cryptocurrencies have a life of their own, but the latest slump is sensible.
“It makes reasonable that if individuals start to retrench a little bit and look for something more stable, they’ll move away from crypto,” she added. “On the edge, as people become more risk apprehensive, cryptocurrency will suffer.”